Investment banking: reduce the risk in a standby commitment, under which the bankers agree to purchase and resell to the public any portion of a stock issue not subscribed to by shareowners who hold rights. The risk is that the market value will fall during the two to four weeks when shareholders are deciding whether to exercise or sell their rights. To minimize the risk, investment bankers (1) buy up the rights as they are offered and, at the same time, sell the shares represented by these rights; and (2) sell short an amount of shares proportionate to the rights that can be expected to go unexercised-to 1⁄2% of the issue, typically. Also called laying off.
Labor: temporarily or permanently remove an employee from a payroll because of an economic slowdown or a production cutback, not because of poor performance or an infraction of company rules.
